Back Seat Marketers

Some deals just don’t create the value promised. AOL and Time Warner ranks pretty high in that category and many, including me, wonder how a deal for so much money could have been so wrong.

Confession: I made a bet on AOL + Time Warner back in the day and lost when it went South. Truth be told, I thought that the combination of the leading distribution network for the web + a leading content provider would be able to find synergies. I was proven quite wrong. What’s worse, my sense is that after 7 years, the same vision could still be implemented with a lot of value creation for consumers and investors.

Here’s what I generally hoped had happened:
AOL moves from charging for access to premium content
AOL needed a new revenue model, but for some reason the company decided that going for advertising dollars was more important than potentially more collaborative efforts that tapped into its content division. Imagine Time magazine + a host of other subscriptions tied into your AOL account online - what was that worth? No idea, but it feels like a path to keep consumers buying v. going to an ad-only online solution. I don’t fault a strategy that has also been employed by the NYT’s, but would question why a harder look at the Wall Street Journal wasn’t considered. What AOL needed to do was create an arms race where access transitioned to add-in content with its service supported by a higher speed internet subscription option. The pieces were all in the company to be leveraged, but like Sony, there have been just too many GM’s to fight to make this vision work.

Time Warner’s premium content leads a new distribution model
Why is Amazon leading the content + hardware revolution? Time Warner had/has a perfect opportunity to leverage its AOL brand and traffic to bring forth the technology needed to deliver on that promise. Movies, magazines, books, music all in a distribution model that sells content via subscription. Isn’t that what Time Warner wants to grow?

In the end, AOL + Time Warner suffered from 2x the incumbent problem
Incumbents with revenues to be lost act differently than start ups with no revenues to lose. To that end, this was a deal that had a chance to be visionary, but was left without a catalyst manager to test some of these options out. Now AOL looks to be spun off at some point when the financials can support it. Too bad.

I would have loved to see something more dynamic, something more like what Jobs did for Apple in 2000 when he charted the plan for iPod + iTunes, but alas, that’s what makes him so special.